An audience with Jack Bogle: ‘Warren can get a little intoxicating’

The founder of Vanguard and index investing pioneer on his friendship with Warren Buffett and his scorn for ETFs

Danilo Agutoli

By

Chris Newlands

October 9, 2017 Updated: October 12, 2017 2:21 p.m. GMT

Eighty-eight-year-old Jack Bogle is something of a pin-up. The ageing investment guru who launched the first-ever index fund in 1976 has many admirers — in fact, he has his own giant fan club, the 50,000 members of the Bogleheads internet forum who lovingly debate and dissect the New Jersey native’s low-cost investment philosophy.

One particular Bogle devotee stands out: Billionaire investor Warren Buffett, who in his annual letter to shareholders produced a remarkable volley of tributes.

"If a statue is ever erected to honour the person who has done the most for American investors, the hands-down choice should be Jack Bogle," the chairman of Berkshire Hathaway wrote in February.

He went on: "In his early years, Jack was frequently mocked by the investment management industry. Today, however, he has the satisfaction of knowing he helped millions of investors realise far better returns on their savings than they otherwise would have. He is a hero to them and me."

Bogle, who founded asset management giant Vanguard more than 40 years ago but stepped down as chairman in 1999, is a little embarrassed by the praise. During an hour-long call from the office he still keeps on Vanguard’s 87-acre campus in Pennsylvania, he says: “Warren can get a little intoxicating but you can only respect him.”

I ask Bogle if he feels flattered by Buffett’s attention. He seems slightly offended.

“Flattery is a funny word,” says the father of six. “Usually flattery means ‘I’m only saying this to make you feel better’. I think Warren genuinely means what he says about me.

“I saw him the other day in New York and we have a nice relationship. Not especially close, but if there’s ever anything I want to ask Warren or talk to him about I can easily do it.”

Bogle recently called in one of those requests. The Princeton graduate is about to publish the 10th anniversary edition of his best-selling book: The Little Book of Common Sense Investing, and the front cover will feature a ringing endorsement from Buffett : “Rather than listen to the siren songs from investment managers, investors – large and small – should instead read Jack Bogle's [book].”

Did he ask Buffett for those exact words? “No, I did not. It was something he wrote in his annual report and I thought it was fair game to use it. But I asked his permission first, which he gave immediately. I would have been too embarrassed to ask him to say what he said as it’s really quite over the top, but it’s wonderful at the same time.”

We move on from Buffett but not too far from the topic of superstar investors. How close is he to Larry Fink, the exuberant chief executive of BlackRock, Vanguard’s arch rival?

‘I think Vanguard are betting on a better horse than BlackRock by relying on traditional index funds as well as exchange traded funds’

“I’ve met Larry a few times,” he says. “I kind of like him. I like some of the things he’s doing and not so much the others.”

Bogle believes the company he founded will wrestle the title of the world's biggest asset manager away from BlackRock due to Fink’s dependence on exchange traded funds, which he says pose a greater threat to the global economy than traditional funds and encourage short-term trading.

"I think Vanguard are betting on a better horse than BlackRock by relying on traditional index funds as well as exchange traded funds, rather than simply ETFs.

"ETFs are fine as long as you don’t trade them. But they are built for trading and trading is the enemy of investors."

ETFs account for 28% of BlackRock's $5.7tn of assets. They make up 18% of Vanguard's $4.4tn of investments under management.

"Vanguard has increased its share of industry assets for about 30 years in a row, and that's going to keep growing, year after year,” he says.

How much the pair earn is another matter. While the assets of the two investment behemoths move in tandem, the pay of the two founders have diverged significantly. In a 2012 interview with the New York Times, Bogle estimated his wealth in the "low double-digit millions". In 2016 alone Fink was paid $25.5m. The year before he earnt $25.8m.

“Larry has made a lot of money compared to poor old Bogle, but he is brilliant,” he says. “Unlike me, however, he has two completely opposed sets of responsibilities: to maximise the earnings of BlackRock and to maximise the returns of the funds BlackRock owns.”

Vanguard does not have outside shareholders. The company is owned by its funds, which are in turn owned by their shareholders. The upshot is Vanguard is able to return profits to investors through lower costs.

“Larry has to serve two masters and, as I’ve written ad nauseam, no man can serve two masters,” he says.

Our phone call is due to come to an end as Bogle is scheduled to host a lunch and impart his wisdom on a group of college students. Before we go I ask him about his health, careful not to upset a man who sounds 30 years younger than his age would suggest. Front of mind, however, is the heart transplant he had 21 years ago and the heart attack he had at the age of 31 — the first of six.

“My heart is good,” he says. “Unfortunately you can’t get all the other sorts of transplants I need. I can’t get a spinal transplant to fix my scoliosis. I carry a walking stick, and I don’t work as hard as I used to. Yes, I need more rest but it would be foolish and futile to complain about the fact I’m not the guy I was 40 years ago.”

Does he miss that guy? “Not really. Times change. I’m very happy with where I am today. I’m happy with the fact the industry has come around to my thinking. It’s helped shareholders in a monumental way and I feel I’ve left my mark. But I’m not through leaving that mark, believe me.”